“Smart money” wallets have been decreasing their proportion of stablecoins, and that’s a sign that traders are in a risk-taking posture. 

Blockchain research firm Nansen labels wallets and addresses as smart money when they meet at least one of several metrics of on-chain profitability and intelligence, such as receiving a substantial amount of coins across several airdrops or making more than $100,000 by being a liquidity provider on decentralized exchange Uniswap. 

Right now, smart money wallets are allocating less than 9% of their holdings to stablecoins, a type of cryptocurrency that is pegged to a fiat currency such as the U.S. dollar as a means to provide price stability. A year ago — and two months after crypto exchange FTX filed for bankruptcy — stablecoins accounted for about 32% of total smart money holdings. 

Smart money’s share of stablecoins as a percentage of total holdings. (Nansen)

The last time smart money’s holding of stablecoins sunk to this level was in Jan. 2022, when BTC was hovering around $42,000 and the total crypto ecosystem’s market capitalization stood at more than $2 trillion. At press time, BTC is priced at around $43,700, while the global crypto market capitalization is nearly $1.8 trillion.

“Stablecoin holding is a good macro indicator showing where the mind of the smart money is. When the chart is peaking — for example, when it was in mid-2022 — that was the maximum risk-off state,” said Nansen data engineer Edgar Rootalu Friday morning in a live stream on YouTube.

The economy in mid-2022 was in turmoil, with high inflation, Fed rate hikes and layoffs across the crypto industry. On June 18 of that year, nearly 42% of smart money holdings were in stablecoins.

“As we see starting from 2023 they’ve been slowly increasing their crypto holdings and decreasing their stablecoin holdings so we’re nearing almost big risk-on behavior here,” Rootalu added.

Update (Jan. 12, 3:15 p.m. EST): Added the stablecoin portion of smart money wallets one year ago.

Update (Jan. 12, 3:11 p.m. EST): Added a descriptor for Nansen and defined the left axis of the graph.